SHANGHAI, Mar 10 (SMM) – In March, mines in high-altitude and low-temperature areas are still in a state of suspension. Some mines delayed production resumption due to the Two Sessions meetings, tightening the supply of domestic zinc ore. Supply is expected to be eased after mid-April. However, zinc ore market diverged across the regions. Zinc ore tightened in Sichuan, Yunnan, and Shaanxi. Smelters faced greater restocking pressure while TCs remained downward trend. Though TCs were flat in inner Mongolia, smelters faced pressure from restocking of zinc ore compared to pre-CNY; they hardly purchased small orders and mainly consumed raw material inventory. Hence TCs are expected to trend lower in inner Mongolia. TCs in Hunan and Guangxi diverged. Producers in these regions held TCs firm and have intention of increasing TCs amid arrivals of imported ore in January and February. But traded prices of TCs for domestic zinc ore were low at other local smelters while the overall zinc ore supply tightened. Zinc TCs diverged in the short term. But TCs still have downward room amid tight supply in March and April. Production costs at smelters are expected to rise, supporting zinc prices.
Refined zinc output at smelters declined 71,100 mt to 471,200 mt in February. Refined zinc output is expected to increase 45,800 mt to 517,000 mt in March amid production resumption and rising working days. Smelters mainly consumed raw materials inventories in February while raw material inventory days decreased by 4.39 days to 22.58 days from the previous month. The current difficulty in ore restocking has caused some smelters to decrease their output from the previous month, especially Shaanxi and Yunnan. SMM estimates that there will be a shortage of 19,700 mt on the supply and demand side in March, and social inventories are likely to decrease. It is suggested to buy the dips.
